OECD Regulatory Policy Outlook 2015

Effective regulation is a lever for inclusive growth, says OECD

Governments should do more to improve the design and delivery of new laws, as even small efforts to fix regulatory shortcomings can have a tangible positive impact on economic activity and well-being, according to a new OECD report.

The OECD Regulatory Policy Outlook 2015 – the first effort to track how OECD countries develop, implement and review their laws and regulations – finds that governments have come a long way in ensuring law-making is accountable and evidence-based. Yet more could be done to improve the way laws are designed, implemented and evaluated.

The report finds that 33 of the 34 OECD countries have adopted an explicit regulatory policy and require regulatory impact assessments and public consultation for all new regulations, while 29 have a designated minister to promote regulatory reform.

However, a third of OECD countries have no policy at all on regulatory compliance and enforcement, and two-thirds have no system for evaluating laws once they are implemented. This creates unnecessary costs for businesses and society, the report says.

Internationally, co-operation in law-making is essential for creating global rules and standards, addressing trade frictions and environmental risks, and reducing the risk of regulatory failures such as the 2008 financial crisis or the recent VW emission tests scandal. Yet only a third of OECD countries have a clear policy for international regulatory co operation.

“Governments tend to focus their energy on getting their tax and spending policies right and often overlook a third lever that can support economic growth – regulation,” said OECD Secretary-General Angel Gurría, presenting the report to the 2015 OECD Public Governance Ministerial Meeting in Helsinki.

“Governments trying to shake off anaemic growth must address shortcomings in regulation and ensure laws work as well in practice as they do on paper. Laws need to be not just well designed but well-implemented, properly evaluated and consistently applied across sectors, jurisdictions and borders,” he said.

Regulatory improvement pays dividends. The report shows that a crackdown on red tape in the United Kingdom saved businesses GBP 10 billion over four years. Simplifying regulation in Belgium delivered savings of EUR 1.25 billion for citizens and businesses. And in Australia, reforms to reduce regulatory costs increased GDP by 1.3%.

OECD governments and industry save EUR 153 million a year through regulatory co operation that reduces chemical testing and uses harmonised formats and work sharing.

Poor coordination on regulation between countries weighs on business and trade. The recently signed Trans-Pacific Partnership and the upcoming COP21 climate change talks underline the growing need for closer regulatory co-ordination in everything from manufacturing and financial services to carbon emissions.